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Commentary: Put your child on a path to building a solid credit score

Commentary: Put your child on a path to building a solid credit score

Greg Chona

Parents want good things for their children, and a good credit record is certainly something that falls into that category. To help children achieve one, it’s important to teach them sound financial habits. Among the most fundamental lessons is valuing the money they earn and that they shouldn’t spend what they don’t have. This is the philosophy behind building a strong credit record over time that will help children take responsibility for their own financial lives.

Access to credit plays an important role in achieving financial goals and building wealth over time. A good credit score can help make it happen.

Here are three ways that you can help your teens and young adult children build a good credit record:

1. Make your child an authorized user on one of your credit cards

This can be done prior to the time your child can obtain their own card, giving them the ability to use the card for their own purchases. You will still be responsible for paying off credit card bills, but your child’s credit score may benefit from being associated with your strong credit record. It can also serve as an initial test of how your child handles credit. Set expectations that they are responsible for repaying you for any charges they accumulate.

2. Have them build their own credit when possible

The time will come when your children will qualify for a credit card. Again, it’s important to stress the importance of paying bills on time each month. Ideally, they will pay off the entire balance monthly to avoid high interest expenses. They also need to make timely payments on any other debt such as student loans, store credit cards, and even on expenses like utility payments. Note: debit card use does not contribute to building a credit score.

3. Encourage them to exercise caution in how credit is used

Achieving a good credit score is a bit of a balancing act for younger people. They need to obtain and use credit in order to accumulate a history that will be reflected in their score. Yet they want to avoid overdoing it. Make sure your child knows not to take risks by using credit to pay large expenses that could require a long payoff period or taking on more than one or two credit cards at a time.

Managing credit is a new experience for most people just entering adulthood. By following these steps, you have an opportunity to set your children on the right track.

Gregory A. Chona is a Certified Financial Planner with Ameriprise Financial Services in Crown Point. He specializes in fee-based financial planning and asset management strategies and has been in practice for 29 years. To contact him visit, call 219-663-9860 ext. 114 or visit 11480 Broadway Crown Point. Ameriprise Financial Services Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax adviser or attorney regarding their specific situation.


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